Can I Skip Life Insurance (on the FI Path)

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The point of life insurance is to protect your loved ones in case something happens to you. If you were to unexpectedly die, could your family still pay their bills without derailing your goals?

The majority of people only need term life insurance. (There are circumstances where whole life or universal can be applicable, but they are few and far between). If you are on the path to FI, and will accumulate, say, $1 million between now and when you “retire” in 7-10 years, you could buy a 10-year, $1 million policy. If you are young and healthy, it will be super cheap.

If you have already reached FI, then maybe you don’t need life insurance at all. However, I have never had a widow tell me their spouse had too much life insurance. When the main breadwinner dies, their spouse is almost always concerned about whether or not they can keep the house; keep paying for their expenses and continue their standard of living.

Term life insurance is so cheap, that if you have young children and are young and healthy, I would suggest a 20-year term policy. This gives your family a little more “protection” if something were to happen to you. One thing I have learned in life and in my business providing financial planning to individuals is that life often does not take the straight line we expect.

Owning a higher amount of life insurance for longer protects your family in the event of unexpected circumstances.

I personally bought a 30-year policy when my youngest was a baby. I wanted to cover costs through college for my children and a for my working life for my spouse (at the time), and the premiums were very cheap for the coverage that I received. If I were to buy any kind of policy now, only 8 years later, it would be more expensive due to my age and health changes.

The amount (or face value) of insurance you should have depends on your personal circumstances. I strongly suggest you work with an independent, fee-only financial advisor to determine the amount of coverage necessary and then a licensed insurance agent to place the coverage.

I have seen some people use the cheapest internet coverage they could find. This can be a problem if you have any kind of health condition, because some companies will provide cheaper life insurance premiums for certain health conditions. Also, some companies will deny you altogether for certain conditions, and once you have an insurance denial on your record it is very difficult to get insurance from anyone.

Those of us in FI don’t like to spend money unnecessarily. However, life insurance is a risk where the consequences of a negative outcome (your premature death) could be catastrophic compared to the relatively small cost when you are young.

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